SHORT TAKES


February 7, 2013

A Response to Richard Vedder on Cutting College Funding

Richard Vedder made the breathtaking  assertion here yesterday that "public support of American higher education, on balance, has increased income inequality in the United States." He claims we must "drastically" reduce government subsidies for education in order to attack income inequality. 

He calls his view "non-orthodox." I would just call it wrong.

Vedder states, for example, that income inequality between 1970 and today has increased "in tandem" with the growth in the percentage of adults with Bachelor's Degrees. He suggests the relationship is causal: Because more adults have college degrees, the income gaps between everybody else and the rich are getting worse.  

This is his proof that a more highly educated workforce leads to more economic inequality, not less. Similarly, we might also say that "in tandem" with the growth of income inequality in America has seen a steep rise in the number of double-car garages in American households. Therefore more double-car garages have caused more income inequality.  

To follow Vedder's logic further down the rabbit hole, in order to make income inequality not worse, it follows that the nation must reduce the numbers of double-car garages, i.e. the numbers of college-educated adults. That means government must tighten up on educational spending, financial aid, and other subsidies. 

In short, government must drastically reduce or eliminate demand-side tools that effectively increase consumers' wealth -- and their ability to invest in education - or anything else, for that matter. And, while he singles out public investment in higher education as the problem, why leave it at that? Human capital investment is human capital investment, regardless of when it occurs. Why not attack the problem of income inequality by gutting government subsidies to first graders? According to every shred of evidence I know, in the long run Vedder's "fix" would decimate wages and salaries, personal income and general spending and investment in the economy.  In this bizarre world, sounds like a sure-fire way to exacerbate inequality, not cure it. 

A little un-orthodoxy is often a good thing, a creative thing we need to help us solve serious problems. I regret to say that Vedder's sort of un-orthodoxy is sadly wasted, and is no solution to income inequality or anything else. 

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